Rio Tinto, the world’s second biggest miner, announced plans to make $5bn
(£3.1bn) of savings as it flagged fears about the prospects for Europe and
the US.

Rio Tinto, the world’s second biggest miner, announced plans to make $5bn (£3.1bn) of savings by the end of 2014, as it warned of “major uncertainties” around the West’s economic future.

The iron ore-focused giant’s ambitious goal to shrink its cost base comes as part of a wider drive across the sector to apply the brakes to spending amid the global slowdown.

“We are taking further tough action to roll back the unsustainable cost increases of the past few years and are maintaining a relentless focus on improving productivity,” Tom Albanese, Rio Tinto’s chief executive, said. “The short-term macroeconomic outlook remains volatile, with major uncertainties around future US and European economic growth.”

The most difficult business areas were aluminium and coal, he said. The industry has seen production of both commodities hit by spiralling costs.

Rio Tintohowever said it was “guardedly optimistic” on the prospects for China, the number one consumer of commodities, predicting a slight rise in Chinese GDP growth to above 8pc next year.

While the FTSE 100 miner has previously talked about making cost savings, the $5bn figure represented the first group target given for its money-saving drive. Shares in Rio rose as much as 2.9pc in early trading in London as the market welcomed its cautious response.

Marius Kloppers, chief executive of BHP Billiton, the largest miner, said the move vindicated its previous warnings that demand for some raw materials had reached a peak and that it was time to act differently.

“We were a little unpopular there late last year when we talked about the cycle having run its course in some of the commodities,” Mr Kloppers said. “I think time has shown that our call was correct.”

Separately, ratings agency Fitch Ratings warned that cost inflation will have a “more visible” negative impact on miners’ 2013 results than in recent years. While commodity prices stagnate, mining costs will continue to climb, driven by rising energy prices and wage inflation as miners agitate for better pay, it predicted.